-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NAY70UEEloJlIFFWqK38vvfJs3VoRh368S/Sf5knoXaVJ23rNaAdM0Sfj3M5spiQ iClSmPOGNd87fUsqTJL/6A== 0000950137-05-004920.txt : 20050426 0000950137-05-004920.hdr.sgml : 20050426 20050426172120 ACCESSION NUMBER: 0000950137-05-004920 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050426 ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050426 DATE AS OF CHANGE: 20050426 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CNA SURETY CORP CENTRAL INDEX KEY: 0001044566 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 344144905 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13277 FILM NUMBER: 05773972 BUSINESS ADDRESS: STREET 1: CNA PLAZA CITY: CHICAGO STATE: IL ZIP: 60685 BUSINESS PHONE: 3128225000 MAIL ADDRESS: STREET 1: CNA PLAZA CITY: CHICAGO STATE: IL ZIP: 60685 8-K 1 c94547e8vk.txt CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 APRIL 26, 2005 (Date of Report) CNA SURETY CORPORATION (Exact name of Registrant as specified in its charter) 1-13277 (Commission File No.) DELAWARE 36-4144905 (State or other jurisdiction) (IRS Employer Identification No.) CNA CENTER, CHICAGO, ILLINOIS 60685 (Address of principal executive offices) (Zip code) (312) 822-5000 (Registrant's telephone number, include area code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 8.01. OTHER EVENTS See Exhibit 99 to this Form 8-K ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits Exhibit 99 - CNA Surety Corporation Press Release issued on April 26, 2005. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CNA SURETY CORPORATION (Registrant) By: /s/ John F. Corcoran --------------------------------------- John F. Corcoran Senior Vice President and Chief Financial Officer Dated: April 26, 2005 EXHIBIT INDEX Exhibit No. - ----------- 99. CNA Surety Corporation Press Release issued on April 26, 2005. EX-99 2 c94547exv99.txt PRESS RELEASE [CNA SURETY LOGO] FOR IMMEDIATE RELEASE - -------------------------------------------------------------------------------- CONTACT: John F. Corcoran, 312-822-1371 Doreen Lubeck, 773-583-4331 CNA SURETY ANNOUNCES FIRST QUARTER 2005 RESULTS CHICAGO, APRIL 26, 2005 -- CNA Surety Corporation (NYSE:SUR) today reported net income for the first quarter of 2005 of $14.1 million, or $0.33 per share, compared to net income of $6.4 million, or $0.15 per share, for the same period in 2004. The increase in net income reflects higher net earned premium, higher investment income, and lower underwriting expenses. "We are happy to report another successful quarter", said John Welch, President and Chief Executive Officer. "Our first quarter results continue the trends established in 2004. Growth in gross written premium exceeded our expectations and our expense ratio continued to improve." For the quarter ended March 31, 2005, gross written premiums increased 7.7 percent to $103.3 million. Contract surety gross written premiums increased 13.0 percent to $56.3 million due primarily to increased volume. Commercial surety gross written premiums decreased 0.3 percent to $37.2 million as continued volume growth in small commercial products was more than offset by declining premiums on large commercial accounts. Ceded written premiums decreased $5.7 million to $18.6 million for the first quarter of 2005 compared to the same period of last year. This decrease reflects a reduction in the cost of the Company's 2005 reinsurance program as compared to 2004. Net written premiums increased 18.4 percent to $84.7 million from the first quarter of 2004. For the quarter ended March 31, 2005, the loss, expense, and combined ratios improved to 26.8 percent, 60.4 percent, and 87.2 percent, respectively, compared to 27.4 percent, 73.6 percent, and 101.0 percent, respectively, for the same period in 2004. The improved expense ratio reflects higher net earned premium and the impacts of cost reduction initiatives taken in the first quarter of 2004. The improved expense ratio also reflects the absence of expenses associated with the initiative to simplify and streamline the Company's field organization and the increased accrual for policyholder dividends that were recorded in the first quarter of 2004. These items added 8.8 percentage points to the expense ratio for the first quarter of 2004. The increase in net earned premium that resulted from the reduction in the cost of the Company's 2005 reinsurance program drove the improvement in the loss ratio. Net investment income for the quarter ended March 31, 2005 was $8.0 million compared to $7.0 million during the first quarter of 2004 due to a significant increase in invested assets throughout 2004. The annualized pretax yield was 4.4% for both the three months ended March 31, 2005 and 2004. Net realized investment gains were $2.0 million and $2.2 million for the three months ended March 31, 2005 and 2004, respectively. The realized investment gain in 2005 resulted primarily from the Company's sale of its interest in De Montfort Group, Ltd. As of March 31, 2005, stockholders' equity increased by 1.3 percent from December 31, 2004, to $452.1 million as the increase from net income was partially offset by a decline in net unrealized gains. Combined statutory surplus totaled $264.2 million at March 31, 2005, resulting in a net written premium to statutory surplus ratio of 1.3 to 1. BUSINESS ENVIRONMENT The Company's business is subject to certain risks and uncertainties associated with the current economic environment and corporate credit conditions. In the past, the Company's performance has been materially impacted by a significant increase in corporate defaults on a worldwide basis. Because the nature of the business is to insure against non-performance, future results of operations could be negatively impacted by adverse trends in corporate defaults. CNA Surety Corporation is the largest publicly traded surety company in the country. Through its principal subsidiary, Western Surety Company, CNA Surety provides surety and fidelity bonds in all 50 states through a combined network of approximately 34,000 independent agencies. The Company's Securities and Exchange Commission filings are available at www.sec.gov or visit us at www.cnasurety.com on the World Wide Web for a direct link to the SEC website. CNA is a registered service mark, trade name and domain name of CNA Financial Corporation. NOTE: A conference call for investors and the professional investment community will be held at 10:00 a.m. Central time on April 27, 2005. On the conference call will be John F. Welch, President and Chief Executive Officer of CNA Surety Corporation and John F. Corcoran, Chief Financial Officer of CNA Surety Corporation. It will also be broadcast live on the Internet at: http:// phx.corporate-ir.net/playerlink.zhtml?c=64019&s=wm&e=1050376 or go to the investor relations pages of the CNA Surety website (www.cnasurety.com) for further details. The call is available to the media, but questions will be restricted to investors and the professional investment community. A taped replay of the call will be available beginning at 12:00 pm Central time on April 27 until 12:00 pm on May 15, 2005 by dialing (800) 839-6713, pass code 7061054 or over the Internet at the foregoing websites. "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: The statements which are not historical facts contained in this release are forward-looking statements that involve risks and uncertainties, including, but not limited to, product and policy demand and market response risks, the effect of economic conditions, the impact of significant increases in corporate defaults on a national or global basis, the impact of competitive products, policies and pricing, product and policy development, regulatory changes and conditions including underwriting limitations imposed by the U.S. Department of Treasury, rating agency policies and practices, development of claims and the effect on loss reserves, the performance of reinsurance companies under reinsurance contracts with the Company, the cost and availability of reinsurance contracts on reasonable terms, investment portfolio developments and reaction to market conditions, the results of financing efforts, the actual closing of contemplated transactions and agreements, the effect of the Company's accounting policies, and other risks detailed in the Company's Securities and Exchange Commission filings. No assurance can be given that the actual results of operations and financial condition will conform to the forward-looking statements contained herein. # # # - -- Chart Follows-- -2- CNA SURETY CORPORATION Press Release Investor Data (Amounts in thousands, except per share data)
THREE MONTHS ENDED MARCH 31, --------------------------- 2005 2004 ----------- ----------- OPERATING RESULTS: Gross written premiums $ 103,293 $ 95,879 =========== =========== Net written premiums $ 84,710 $ 71,554 =========== =========== Revenues: Net earned premiums $ 80,563 $ 75,197 Net investment income 7,971 6,977 Net realized investment gains 2,011 2,230 ----------- ----------- Total revenues $ 90,545 $ 84,404 ----------- ----------- Expenses: Net losses and loss adjustment expenses(1) $ 21,591 $ 20,631 Net commissions, brokerage and other underwriting expenses 48,645 55,312 Interest expense 774 342 ----------- ----------- Total expenses 71,010 76,285 ----------- ----------- Income before income taxes 19,535 8,119 Income taxes 5,460 1,745 ----------- ----------- NET INCOME $ 14,075 $ 6,374 =========== =========== Basic earnings per common share $0.33 $0.15 ===== ===== Diluted earnings per common share $0.33 $0.15 ===== ===== Basic weighted average shares outstanding 43,076 42,991 =========== =========== Diluted weighted average shares outstanding 43,304 43,055 =========== ===========
See notes to Press Release Investor Data on page 5. -3- CNA SURETY CORPORATION Press Release Investor Data (Amounts in thousands)
THREE MONTHS ENDED MARCH 31, --------------------------- 2005 2004 ----------- ----------- UNDERWRITING RESULTS: Gross written premiums: Contract $ 56,271 $ 49,787 Commercial 37,213 37,331 Fidelity and other 9,809 8,761 -------- --------- $ 103,293 $ 95,879 ========= ========= Net written premiums: Contract $ 40,052 $ 33,903 Commercial 34,849 29,269 Fidelity and other 9,809 8,382 --------- --------- $ 84,710 $ 71,554 ========= ========= Net earned premiums $ 80,563 $ 75,197 Net losses and loss adjustment expenses(1) 21,591 20,631 Net commissions, brokerage and other underwriting expenses 48,645 55,312 --------- --------- Underwriting income (loss) 10,327 (746) Net investment income 7,971 6,977 Net realized investment gains 2,011 2,230 Interest expense 774 342 --------- --------- Income before income taxes 19,535 8,119 Income taxes 5,460 1,745 --------- --------- NET INCOME $ 14,075 $ 6,374 ========= ========= Loss ratio(1) 26.8% 27.4% Expense ratio 60.4 73.6 --------- --------- Combined ratio(1) 87.2% 101.0% ========= =========
See notes to Press Release Investor Data on page 5. -4- CNA SURETY CORPORATION Press Release Investor Data (Amounts in thousands, except per share data)
THREE MONTHS ENDED MARCH 31, ---------------------------- 2005 2004 ----------- ------------ CASH FLOW DATA: Net cash provided by operations $ 2,532 $ 42,890
MARCH 31, December 31, CONSOLIDATED BALANCE SHEET DATA: 2005 2004 ----------- ------------ Invested assets and cash $ 751,711 $ 766,387 Intangible assets, net 138,785 138,785 Total assets 1,168,019 1,174,494 Insurance reserves 592,413 589,406 Debt 60,513 65,488 Total stockholders' equity 452,136 446,371 Book value per share $ 10.48 $ 10.38 Outstanding shares 43,127 43,015 ========== ==========
- ---------- NOTES TO PRESS RELEASE INVESTOR DATA (1) Includes the effect of recording revisions of prior year reserves. The dollar amount and the percentage point effect on the loss ratio of these reserve revisions was a reduction of $287, or 0.4%, for the three months ended March 31, 2004. There was no revision of prior year reserves for the three months ended March 31, 2005. -5- -----END PRIVACY-ENHANCED MESSAGE-----